Even After 4 Years of Pressure... Will Multi-Homeowners Sell Just Because Official Property Prices Rose?

Government Pressured for 4 Years, but Multi-Homeowners Increased by 15%
Homeless People Also Rose by 260,000... Only Raising the Threshold for Homeownership
Expectations of Future House Price Increases... Holding Rather Than Selling
March-April, When Capital Gains Tax and Property Tax Avoidance Sales Occur, Is a Turning Point

A view of Seoul city apartments from the observatory of 63 Building in Yeongdeungpo-gu, Seoul. (Photo by Yonhap News)

[Asia Economy Reporter Ryu Tae-min] This year, the official prices of apartment complexes nationwide have risen by an average of more than 19% compared to last year, drawing attention to whether this will lead to multi-homeowners disposing of their properties due to increased tax burdens. Various tax regulations such as comprehensive real estate tax and capital gains tax are key tools used by the Moon Jae-in administration to pressure multi-homeowners, whom they identified as the main culprits behind rising housing prices.

Opinions are divided on whether the sharp rise in official prices will pressure multi-homeowners to sell their properties. Some expect that multi-homeowners, facing a steep increase in tax burdens due to the surge in official prices, will dispose of surplus homes. On the other hand, there is still optimism about rising housing prices, and there are signs that a significant portion of the tax burden is being passed on to tenants. There are also concerns that the soaring official prices may increase distrust in policies and only stimulate the market.

Multi-homeowners have increased over the past four years

There are concerns that the government's recent official price hike measures will only increase the tax burden on genuine buyers and fail in their goal of 'cracking down on multi-homeowners.' In fact, despite the current administration's efforts over the past four years to pressure multi-homeowners through various regulations such as housing holding taxes and capital gains taxes on multi-homeowners, the number of multi-homeowners has actually increased.

According to Statistics Korea's 'Housing Ownership Statistics,' the number of multi-homeowners owning two or more houses was 2,283,758 as of November 2019. This is a 15.3% increase compared to 1,979,784 in November 2016, just before the Moon Jae-in administration took office. In particular, those owning three or more houses, identified as the main cause of the housing price surge, increased by 17%, from 415,924 to 486,867 during the same period.

The number of people without homes has also steadily increased. According to the data, the number of households without homes rose by more than 260,000, from 8,624,204 in November 2016 to 8,886,922 in November 2019. Statistics for 2020 are expected to be released in the second half of this year.

Hold or Sell... April is the Turning Point

In the market, despite the increased tax burden due to the sharp rise in official prices, there is a forecast that there will be no significant disposal of properties by multi-homeowners that would achieve policy effects. While some tax-saving listings may increase, it is not expected to be enough to bring down housing prices.

This is because expectations have formed that the skyrocketing housing prices since last year will continue to rise. The market believes that although the holding tax burden increases due to the rise in official prices, the profits gained from future housing price increases will be greater, making it uncertain whether multi-homeowners will put their properties on the market.

There are also concerns that the burden caused by the surge in official prices may be passed on to tenants. In fact, right after the announcement of this year's official price increase rate, major real estate communities posted comments from landlords saying, "With housing prices rising by billions of won, would anyone sell their house just because they are afraid of paying tens of millions in holding tax?" and "They will endure by passing as much of the holding tax burden as possible onto tenants."

Experts believe that the market trend will be determined by how many properties multi-homeowners put up for sale within the next month or two. From June 1, holding taxes reflecting this official price increase will be imposed, and the capital gains tax surcharges on multi-homeowners will end. Park Won-gap, Senior Real Estate Specialist at KB Real Estate, said, "To sell reflecting the current holding tax and capital gains tax, contracts need to start being made by March or April," adding, "The direction the real estate market takes during this period will reveal whether the policy is successful."

This content was produced with the assistance of AI translation services.